If history is any example . . . the entrepreneur will eventually arise to enliven the future of space exploitation. — E. P. Wheaton and M. W. Hunter, 1966 [1]

I'm going to be a billionaire. A lot of us are. — H. Keith Henson, 1977 [2]

It would be easier to start a private space program in the Soviet Union than in the United States. — Klaus Heiss, 1983 [3]

For the first two decades of the Space Age, the U.S. space enterprise was dominated overwhelmingly by government agencies and their contractors. Only the government could afford the investment in some of these new technologies. Only the government had launch vehicles.

Things started to change in the late 1970s, at roughly the same time that a citizens pro-space movement was beginning to flower. Many of the technologies of space had matured, and knowledge of them had diffused widely. Some systems that NASA had developed had been operational for years, and there were questions as to whether they still fell within NASA's mandate of research and development. The Space Shuttle, originally scheduled to fly in the late 1970s, promised reusable transportation able to revisit facilities in orbit. The concepts of space manufacturing and space industrialization were no longer alien; the idea of their being accomplished by private investment became a topic of public discussion, particularly after the landmark October 1977 meeting of the American Astronautical Society in San Francisco. There was a growing realization that space need not be a government monopoly and that the private sector could be an independent actor, not just a contractor. The failure to get government funding for major space projects such as satel­lite solar power stations and space colonies also may have been a factor.

Meanwhile, a policy evolution had begun tentatively late in the Carter administration, with moves toward "privatizing" some government-developed space systems, and with the development of new mechanisms for joint NASA/commercial activity in space. This trend accelerated as the pro-private enterprise Reagan White House, committed to curbing government competition with business and industry, endorsed privatization and changed the policy, regulatory, and economic climate for private space ventures.

The turning point occurred between 1981 and 1983. The first flight of the Space Shuttle made reusable space transportation a reality. After a spectacular failure, launch vehicle entrepreneurs scored a success. Congress, stimulated in part by a small but growing lobby for space commercialization, began acting in parallel with the administration, and sometimes ahead of it.

Some existing aerospace companies and other established firms saw opportunities in these changes. However, the idea of space com­mercialization also attracted bright young people of a new generation, impatient with the old, politically dependent ways of getting into space. There was a sudden flowering of new, entrepreneurial commerical space ventures between 1980 and 1983, at roughly the same time as the peak of the space group boom. In part, this reflected a new wave of entre­preneurship that was emerging throughout the American economy, led by a younger generation. The emergence of new centers of venture capital in Houston and in northern California's "Silicon Valley" was a factor. However, many of these new entrepreneurs also had connections to pro-space activism and were extensively intertwined with the new pro-space movement. Space commercialization was another way of making the space dream real.

THE FIRST COMMERCIALIZATION

The great success story of commercializing space technology is the communications satellite. "Never in history has there been so rapid a commercialization of a new technology," says former NASA Administrator Thomas O. Paine.[4]

First proposed by Arthur C. Clarke in 1945, extraterrestrial relays in geosynchronous orbit became an operating reality with SYNCOM II in 1962. There was a vigorous debate in the early 1960s over whether such a vital utility should be a commercial operation. Compromises led to the Communications Satellite Act of 1962, which enabled the creation of a privately funded corporation regulated by the federal government called the Communication Satellite Corporation (COMSAT). The new company was to be the U.S. participant in an international satellite telecommuni­cations system (INTELSAT), which was created in 1964.

With its monopoly on overseas commercial communication by satellite, COMSAT has been highly successful. As of August 1982, it was allowed to enter fields other than satellite communications.
Meanwhile, the satellite communications industry had diversified. In the deregulatory environment of the early 1970s, private firms were allowed to establish domestic satellite systems in the United States, despite the opposition of American Telephone and Telegraph. Beginning with Satellite Business Systems in 1975, domestic communications satellite companies have proliferated remarkably. As of late 1984, it appeared that other companies had been at least partially successful in challenging COMSAT's monopoly on overseas traffic.[5]

Satellite communications now is a mature industry, with a global satellite market worth about $4 billion in 1985.[6] In addition to the numerous private firms that are suppliers, operators, and contractors in the field, it has a specialized nonprofit organization, the Public Service Satellite Consortium. It has its own conferences (one is called the annual "Satellite Summit") and its own specialized publications, such as Satellite News, the International Journal of Satellite Communications„ and the annual Satellite Directory. It also has its own professional organization, the Society of Satellite Professionals (SSP). Initially formed in August of 1982 and formally launched in August 1983, the SSP had 325 individual members and three corporate sponsors as of January 1984.[7]

The success of satellite communications occurred because the circumstances were right: the communications industry already was highly developed, the technology was ready, satellites offered more economic and efficient ways of performing services, and there was a large and growing market. The situation is less clear for other areas of space commercialization.

DIRECT BROADCAST SATELLITES

Another application of space technology that was proposed early in the Space Age was the direct broadcasting of television signals from satellites to home receivers. NASA tested direct-broadcast satellite (DBS) concepts with its Applications Technology Satellites in the 1970s, but the commercialization of this technology was delayed in the United States for a variety of reasons, including commercial and institutional resistance and the need for further technology development. Meanwhile, some other nations were planning actively for DBS systems.

Because of rising interest in the United States, the Federal Communications Commission (FCC) began an inquiry into regulatory policy in this area in 1980. Despite opposition from the National Association of Broadcasters, the FCC decided in April 1981 to endorse direct broadcasting from satellites and accepted for expedited consideration a plan by Satellite Television Corporation (a subsidiary of COMSAT) to begin the service as early as 1985.[8] Other companies entered the field, with some choosing to lease capacity on the satellites of other firms rather than waiting for dedicated satellites of their own.[9]

The companies clearly believe that the technology is mature enough and that a market exists. There is no equivalent to COMSAT or INTELSAT in this field, which is open and competitive. DBS already has its own trade association, the Direct Broadcast Satellite Association, which was formed in the summer of 1983. However, COMSAT dropped its plan for a DBS network in late 1984, citing "unacceptable risks."[10] As of 1985, the future for commercial DBS in the United States remained unclear.

PRIVATIZING LANDSAT

In its space policy statement of June 1978, the Carter administration made a gesture toward space commercialization when it established this as one of its principles: "The United States will encourage domestic commercial exploitation of space capabilities and systems for economic benefit and to promote the technological position of the United States."[11] However, the only specific action mentioned in the Private Sector section of the October 1978 statement on civil space policy was that NASA and the Department of Commerce were to prepare a plan of action on how to encourage private investment and direct participation in civil remote sensing systems.[12]

What this meant was that the administration, particularly the Office of Management and Budget, wanted to turn the government's remote sensing satellites over to the private sector and get them out of the federal budget. This is perhaps the best illustration of one form of commercialization: privatization, in which a government-developed asset is turned over to private industry.

Observing the Earth was one of the earliest successful applications of space technology, made most familiar through weather satellites. NASA began an Earth Resources Survey Program in 1965 and launched its first Earth Resources Technology Satellite in 1972. Renamed LANDSAT, this series continued, with the fifth satellite being put into orbit in March 1984.

These spacecraft have returned large quantities of useful and sometimes beautiful imagery of the Earth.[13] Ground stations to receive the data were built in the United States and other countries, and a data center was established in Sioux Falls, South Dakota. The United States encouraged other nations (particularly in the developing world) to purchase their own Earth stations to take advantage of LANDSAT imagery for such purposes as land use planning. LANDSAT data were used in a cooperative project between NASA and the U.S. Department of Agriculture to see if crop estimates could be improved. A "value-added" industry grew up around LANDSAT, composed of small companies that processed the data to meet the needs of users. Some university scientists made use of the data in their research. The result was a constituency that wanted continuity of data and that regarded LANDSAT as a kind of public service.

NASA managers and engineers, who saw LANDSAT as a technology development program of the kind NASA is supposed to conduct, wanted to move on to newer technologies, and they placed a relatively low priority on data continuity. The Office of Management and Budget complained about the cost of each LANDSAT (about $300 million a copy in the early 1980s) and saw no reason for the government to continue putting up more of them. If the system had become operational in effect and was performing a valuable service, one argument ran, let the private sector do it on a commercial basis.

Under a November 1979 directive, the Department of Commerce was given temporary stewardship of the LANDSAT system beginning in 1981. That department's National Oceanic and Atmospheric
Administration was to operate LANDSAT along with its existing weather satellites (which had been transferred to NOAA when they became operational), while charging enough to recover its costs. Once NASA finished proving out the second-generation satellites, they, too, would be turned over. Meanwhile, NOAA was to work out a plan for the timely transfer of remote sensing technology to the private sector.

The incoming Reagan administration, in its budget cuts of March 1981, eliminated funding for two more LANDSAT spacecraft and accelerated the planned pace of transfer to the private sector. Once LANDSAT-D died in 1985 and LANDSAT-D prime in 1987, that would be the end. Thereafter, the remote sensing program would be in the hands of the private sector.[14]

Numerous objections were raised by the user community and by members of Congress, with some arguing that remote sensing data are a "public good." Others said that commercialization of the whole system was premature; revenues from the existing LANDSAT system were only about $10 million a year. Some people, like then American Astronautical Society President Charles Sheffield, argued for phased commercialization, with private industry doing the analysis and distribution of data until the market grows large enough to support private sector remote sensing satellites.[15]

The situation was complicated further when COMSAT offered to take over both LANDSAT and NOAA's weather satellites, if the government guaranteed the company enough business. President Reagan directed the Cabinet Council on Commerce and Trade to study the feasibility of transferring both LANDSAT and the weather satellites to the private sector. Studies reportedly showed that the demand for LANDSAT-type services would be insufficient to support a commercially viable industry. After an initial decision in April 1982 that the weather satellites should remain with the government, the Cabinet Council was asked to reconsider, and subsequently it recommended commercialization of land, weather, and ocean satellites. Of the private companies that responded to a Department of Commerce request for information, only COMSAT recommended commercialization of both the land and weather satellites. In March 1983, the President announced his decision to transfer the government's civil operational remote sensing satellites to the private sector, including LANDSAT and the weather satellites, as well as the responsibility for any future ocean observation systems. This was to be carried out by a competitive process in which U.S. private firms would enter bids. However, opposition to the sale of the weather satellites was strong in Congress. Both the House and the Senate passed resolutions sending a clear message to the administration that they would not accept the sale of those satellites.

In November 1983, the administration dropped the idea of selling the weather satellites, but in January 1984 it issued a request for proposals for the takeover of the LANDSAT system and continued program operation. The original seven bids were narrowed to one by late 1984 and the EOSAT Corporation took over the system in 1985. However, the outcome was still in some doubt because of disagreements about the size of the federal subsidy to the private operator. Meanwhile, bills providing plans for the commercialization of the LANDSAT system became law in late 1984.[16]

The situation has been complicated further by the emergence of foreign competition in the form of the French SPOT remote sensing satellite and a transnational joint venture called SPARX, which planned to use a remote sensing system taken into space on the Space Shuttle. A leading figure in the SPARX enterprise was the ubiquitous space entrepreneur Klaus Heiss, who had developed important economic arguments for the Space Shuttle a decade earlier. However, the future of SPARX appeared to be in some doubt as of 1985.[17]

The LANDSAT story has raised questions about the commercial feasibility of privatizing government space systems not developed for commercial purposes. Some space entrepreneurs prefer that new enterprises be private from the beginning, notably in the field of expendable launch vehicles.

COMMERCIAL LAUNCH VEHICLES

The idea of private groups or individuals building their own vehicles to go into space has a long history in science fiction, dating back at least as far as Jules Verne's From the Earth to the Moon. The earliest rocket experimenters, private citizens without government funding, dreamed of building vehicles that could carry humans beyond the Earth. Since the arrival of a real manned space program, it has been a matter of concern to many space advocates, particularly those of a libertarian bent, that access to space is controlled by government agencies.

As of the late 1970s, it was national policy that the government's expendable launch vehicles would be phased out after the Space Shuttle was declared operational, an event that occurred after the fourth mission in July 1982. However, the Shuttle, a developmental vehicle, proved to be an expensive way of launching some payloads. It was not ideal for all launching tasks, and niches appeared for potential commercial operators. NASA's expendable launch vehicles were to become redundant, presenting an opportunity for privatization of these vehicles. Meanwhile, the European Space Agency was developing a competitor to the Shuttle in its expendable Ariane launch vehicle, which lifted its first commercial payload into orbit in 1983. This situation raised complex policy questions, including whether private operators should be allowed to compete with the government launch system, and whether the cost of putting a commercial payload into space on the Shuttle should be subsidized to make it competitive.

By the late 1970s, several individuals were convinced that early space development and easy access to space would be possible only if the cost of getting into orbit were brought down significantly and that the job could be done more cheaply by private enterprise. They tended to share the view that it was important to establish alternatives to government control over access to space and to make it easier for large numbers of people to go.

OTRAG

The first enterprise to test a private launch vehicle meant for commercial use emerged not in America but in West Germany. Aeronautical and propulsion engineer Lutz T. Kayser, who began pursuing his dream of a low-cost launcher in the 1960s, got funding from the German government for rocket motor tests until 1974. With a motor well developed, he and some colleagues put together a company called Orbital Transport and Rockets A.G. (OTRAG) to develop simple expendable launch vehicles that could place civilian payloads into orbit for a fee, particularly for less-developed countries that did not have their own launchers. The chairman of OTRAG's board was Kurt H. Debus, a long-time associate of Wernher von Braun.[18]

In 1976, OTRAG obtained a tract a third the size of Colorado in eastern Zaire for a near-equatorial launch site, a sort of private Cape Canaveral. The firm conducted some initial tests, including a May 1977 launch to low altitude of its smallest module. However, OTRAG became politically controversial as the Soviet Union and some other countries accused it of developing military rocketry, and the company was forced to close down its Zaire range in 1979. After looking for other locations, OTRAG began testing in the Libyan desert, claiming a successful launch to low altitude in March 1981. By that year, the company reportedly had raised $65 million from private investors attracted by tax benefits.

In September 1981, the press reported U.S. government concern about the possible use of commercial rockets for military purposes, particularly the proliferation of a nuclear weapon delivery capability to additional states. By the end of that year, OTRAG had pulled out of Libya and Kayser was out of the company. Frank Wukasch, who became president of OTRAG, said the firm would seek to avoid political controversy in the future by using existing launch ranges for tests. The company was hoping to market a series of sounding rockets as a first step.

As of June 1984, OTRAG was looking for a non-German, preferably American, business partner. Ten years after its founding, it still was not a commercial success.

The Back Yard Rocketeer

In July 1938, a young U.S. Navy midshipman named Robert Truax, a member of the American Rocket Society, visited London to inform the British Interplanetary Society about his rocket experiments. For the next two decades, Truax pursued his interest in rocketry within the military services, rising to head the U.S. Air Force space program from 1956 to 1958. As president of the American Astronautical Society, he generated a recommendation to President Eisenhower for a strong civilian space program. Retiring from the Navy in 1959, he joined Aerojet General the next year. There he formed a small group to study a cost-effective Earth­to-orbit transport vehicle.[19]

At the time, the U.S. Navy had a team headed by Captain John Draim working on the "Hydra" project, a study of launching rockets from the water. Truax heard about it and got involved in tests of rockets off the California coast that showed that water launch was feasible. By 1963, Truax's group had completed a study of the "Sea Dragon," a very large but simple rocket that would be launched from the water. However, according to Truax, NASA was not interested.

Leaving Aerojet General in the mid-1960s, Truax headed a recoverable launch vehicle study sponsored by the American Institute of Aeronautics and Astronautics that he believes was instrumental in convincing NASA to begin work on the Space Shuttle. He intruded on the public consciousness in September 1974 when he built the rocket for stuntman Evel Knievel's jump across the Snake River Canyon. Although that jump failed, Knievel asked Truax what they could do next. Truax says he told Knievel that for $1 million, he could make Knievel the world's first private astronaut. However, Knievel was not able to raise the money.

Impressed by the media interest in Knievel's jump (and by what he had been able to do in his own back yard) Truax, in 1976, embarked on a project to build a small rocket that would carry a volunteer on a suborbital flight (as of 1983, he reportedly had 4,000 volunteers).[20] The rocket, which has been ground-tested, is labeled Project Private Enterprise (it also has been called the "Volksrocket"). Truax plans to use the media event to attract support for an intermediate-sized launch vehicle called Excalibur. Eventually, the firm might become the operator of a spaceline.

As of April 1984, Truax had spent about half a million dollars on this project and estimated that it would cost $1 or $2 million more. Still the rugged individualist, Truax was continuing to work on the rocket in the garage of his California home. "My area," he says, "is getting to space as cheaply as possible."[21]

The Dreamer from St. Paul

If Robert Truax represents the older generation of private launch vehicle dreamers, Gary C. Hudson represents the younger. An award-winning science student in high school in St. Paul, Minnesota, Hudson went on to study physics, astronomy, and microbiology at the University of Minnesota, although he never received a degree. Hudson foresaw two areas of high technology with good commercial prospects: biotechnology and space. Betting that space would come earlier, Hudson left the university in 1971 and began a career as a writer, consultant, and lecturer on private sector approaches to space activity — at the age of 21. Unable to find financing for a private company of his own (his businessman father had told him never to work for anyone else), Hudson started a nonprofit organization called the Foundation Institute to promote the development of space technology. Inspired by the foundation in Isaac Asimov's science fiction trilogy of that name, this small, home-based institution published Foundation Report, which contained visionary articles about the future in space (it later became the Commercial Space Report). Advertising in Astronomy magazine as late as 1978, the institute described itself as being on the frontier of the next industrial revolution.[22]

During the 1969-72 period, Hudson concluded that the primary hindrance to the commercialization of space was transportation and began working on designs for launch vehicles. He recalls being concerned that NASA was not sympathetic to the development of private launch services that could become competitors to the Space Shuttle. Meanwhile, older aerospace experts such as Robert Salkeld and Philip Bono were proposing their own alternatives to the Shuttle.

Hudson pursued his private vision for years without success. Only when he made contact with other space commerce visionaries did a critical mass develop behind such ideas.

Spaceport

Free market principles also were a driving force behind moves in the mid-1970s to develop offshore launch sites for commercial enterprises. A Harvard Business School graduate, Paul Siegler, founded the company Earth/Space in Palo Alto, California, in 1975 to develop "low cost ways of getting to and using space," including the possible use of equatorial launch facilities. Siegler played a leading role in organizing the American Astronautical Society's October 1977 conference in San Francisco, apparently the first to highlight private investment in space industrialization. His organization put out several issues of Earth/Space News but folded in the late 1970s.[23]

In 1976, Siegler invited another young Harvard graduate, Mark Frazier (self-described as a "Friedmanite"), to join the board of the company. To maximize cost-savings for private launch vehicles, Frazier suggested in October 1976 that a tax-free trade zone be established in conjunction with an international equatorial launch site. During the late 1970s, Frazier's free enterprise-oriented Sabre Foundation, which had been financed by conservative, free-market interests, developed the idea of an Earthport, a free trade zone that would include an international satellite launch facility. The name apparently was suggested by lawyer Arthur Dula, later an activist with the Houston-based Space Foundation. Hudson has suggested that the name may have been inspired by Arthur C. Clarke's vision of the "ports of Earth" in his 1968 book The Promise of Space; Frazier thinks the source was Robert A. Heinlein's Starman Jones.[24]

Initially, the headquarters of this project was in Santa Barbara, California, where Frazier started the World Space Center. Early donors included Arthur C. Clarke and Barbara Marx Hubbard. In addition to putting out World Space News, Frazier prepared a brochure on Earthport and mailed it to officials in all equatorial countries, the most logical sites for such an installation.[25] According to Frazier, he got back many positive responses. However, the project reportedly met resistance from the State Department and a lack of interest from aerospace companies.

The Sabre Foundation decided to take an indirect approach, spinning off Free Zone Authority Ltd. as a nonprofit consulting firm on free trade zone development with Frazier as its president. The aim, says Frazier, is to get technology-oriented zones established and to show that free trade zones can generate revenue for training and economic development. In the free trade zone destined to house a spaceport, revenues could be used to train third-world personnel in the techniques of remote sensing from space and to invest in promising space enterprises. Frazier believes the space-oriented freeport would build up an international constituency and give less-developed countries a stake in space.

The ultimate goal of this enterprise is to help self-sustaining space commerce get started and to get more people into space. The implied goal of breaking the great power monopoly on space launch facilities is reminiscent of Lutz Kayser's OTRAG. Meanwhile, a press report has suggested that Brazilian authorities are interested in developing an equatorial spaceport for all of Latin America.[26]

Houston Meets Silicon Valley

In 1976, successful Houston real estate developer David Hannah saw an article about Gerard K. O'Neill's space colony ideas in Smithsonian magazine.[27] Hannah decided that he wanted to do something practical to help get people into space. He tried to get the Carter administration interested but without success.[28]

In the fall of 1979, Hannah and Gary Hudson both were attending a fund-raiser in Houston for the then new Space Foundation, where they were introduced by Arthur Dula. Hudson concluded that Hannah was a potential investor in a private space transportation company, and the two began negotiating.

Early in 1980, Hudson moved to California's Silicon Valley to work with young English-born aerospace engineer Stan Kent, the founder of the organization Delta Vee. There he met three other young pro-space activists who were to play a role in the private launch vehicle industry: James Bennett, Philip Salin, and Gayle Pergamit.[29]

James Bennett had studied anthropology at the University of Michigan, the first home of FASST (he recalls that the organization's efforts to build support for high technology failed to excite most students). Bennett was more intrigued by Gerard O'Neill's space colony ideas and organized an L-5 Society chapter on campus.

Bennett moved to California and attended the October 1977 American Astronautical Society conference in San Francisco, where Christian Basler stirred interest by proposing a financing mechanism for space ventures called the staging company.[30] In 1978, Bennett got involved in the Earthport project and relocated to Santa Barbara, where he worked with Mark Frazier.

In 1980 he moved back to the San Francisco Bay area where he began working with Philip Salin, a UCLA economics student and Stanford MBA who had founded the Stanford Center for Space Development in 1978 (Salin recalls being influenced by Gerard O'Neill's ideas). Gayle Pergamit, another Stanford graduate and a co-founder of the SCSD, joined them. In the spring of 1980, the three decided to work with Gary Hudson in creating the first American commercial launch company, to be called Advanced Propulsion Technologies. Bennett continued the political and regulatory research started at Earthport; Pergamit researched the market for commercial launch vehicles; Salin mapped out a strategy for raising funds. However, disagreements between these three and Hudson regarding what it would take to succeed led to a split. Bennett, Salin, and Pergamit left to found Space Enterprise Consultants, which surveyed potential launch sites and did market analyses of space commerce. Hudson formed a company called GCH (his initials).

Failure and Success

In January 1981, Hudson came up with a design for a launch vehicle he called the Percheron. Hannah and others created a Percheron joint venture to finance the project. Presented with the opportunity of a lifetime at age 29, Hudson felt under pressure to do the job quickly and cheaply; Hannah's enthusiasm for an early demonstration flight, and the fact that the funding available for the venture was closer to $1 million than the $5 million Hudson had estimated would be necessary led him to cut corners. With hindsight, he recognizes that this was a mistake. But history will record that on August 5, 1981, Percheron blew up on a pad on Matagorda Island off the coast of Texas, apparently because of a frozen valve that had worked two days before.[31]

Hudson and Hannah ended their business relationship, and Hudson went on to found a new company called Pacific American Launch Services in Redwood City, California. His hope is to build a large, squat launch vehicle called the Phoenix as a competitor to the Space Shuttle. Hudson appears unfazed by the estimated cost of $100 million.

Meanwhile, the political and policy climate was changing. The Reagan administration had initiated a study of space policy in August 1981, about the time of the Percheron explosion. On July 4, 1982, when the fourth Shuttle mission landed at California's Edwards Air Force Base and the system was declared operational, the White House released a fact sheet on national space policy that listed as one of its basic goals "Expand private sector investment and involvement in United States space activities," and as one of its principles "the United States encourages domestic commercial exploitation of space capabilities, technology, and systems for national economic benefit." The fact sheet went on to state, "The United States government will provide a climate conducive to expanded private sector investment in space activities."[32]

David Hannah's Space Services Incorporated continued work on developing a commercial launch vehicle. Getting the assistance of retired NASA experts from the Johnson Space Flight Center near Houston and hiring aerospace contractors, Space Services moved toward acquiring or developing a rocket based on tried technology. The central issue was finding a reliable propulsion system. With the help of a network of pro-space contacts including O'Neill associate T. Stephen Cheston, the company approached the Air Force in the fall of 1981 about purchasing an extra second stage of a Minuteman missile. After the initial disbelief of its officials ("You want a what?", quotes Cheston), the Air Force referred the firm to NASA, which eventually agreed to help. Meanwhile, Space Services acquired the services of former astronaut Donald K. "Deke" Slayton, who became the company's president. Leading Space Services figures met with Presidential Science Adviser George Keyworth, who reportedly said that the White House liked the firm's entrepreneurial spirit even though the first rocket had blown up.[33]

This time the launch was a success. On September 9, 1982, Conestoga I lifted off Matagorda Island on a near-perfect suborbital flight.[34] The first successful test of a privately financed American launch vehicle, it was a symbolic turning point for space commercialization and the new entrepreneurs. However, it had been done with a rocket developed originally with government money and tested by an established firm, the Space Vector Corporation.

One of those present at the launch was Charles Chafer, the experienced young space activist who had been with Stephen Cheston's Institute for the Social Science Study of Space and who gave papers on space politics at O'Neill's Princeton conferences. Chafer became a vice-president of Space Services as well as its representative in Washington.[35] His wife Sallie, who also had been active with the ISSSS, announced the countdown for the successful launch.

As of 1984, Space Services was working toward a larger launch vehicle called the Conestoga 11.[36] According to Deke Slayton, the company's motto is "Have rocket, will travel."[37]

The Stars Truck

Having made a thorough survey of private enterprise opportunities in space, Bennett, Salin, and Pergamit confirmed their opinion that transportation was the key to space industrialization. Their analyses showed a market opportunity for private launch vehicle companies. In March 1981, they and engineer Bevin McKinney formed a company known as Arc Technologies, betting they could outperform GCH (McKinney had been Director of the Space Now Society at the time of Space Day 2 in 1978).

Arc Technologies spent 1981 raising funds in Silicon Valley, which Bennett describes as "a large pool of capital with independent perspective and judgement, autonomous of Wall Street."[38] By early 1982 ARC Technologies was developing an engine for a suborbital test vehicle called the Dolphin, which was to be launched from the sea.

The company was boosted by an investment in February 1982 by former Apple Computer President Michael Scott, who became president of the new company that December. Arc Technologies was renamed Starstruck (Stars Truck) in May 1983. Salin and Pergamit left the company, but Bennett stayed on as vice-president for governmental affairs. In Washington, Starstruck was represented by Courtney Stadd, the young space activist who had been the National Space Institute's manager and the editor of its newsletter.

After three attempts to launch the Dolphin from the ocean near San Clemente Island were postponed because of technical problems, Starstruck enjoyed its first successful launch on August 3, 1984.[39] Although this launch attracted less attention than Space Service's Conestoga I, it was the first time Americans had launched a private space launch vehicle that they had developed entirely by themselves, and it was the first private launch from the water. However, the development of this vehicle had cost more than expected. As of 1985, the future of Starstruck was in some doubt.[40]

Deregulating Space

The negative side of the Space Services success in 1982 was that it had taken the firm six months and $250,000 in legal fees to get permission from federal agencies for the launch.[41] The company, which was looking at a possible Hawaiian launch site, made contact with Congressman Daniel Akaka of Hawaii, who had become co-chairman of the Congressional Space Caucus. Akaka aide Diana Hoyt, then holding together both the caucus and the Congressional Staff Space Group, drafted a bill called the Space Commerce Act to streamline the regulatory procedure, in part by designating a "lead agency" within the government that would provide a single point of contact. Akaka introduced the bill in December 1982. At about the same time, the administration responded to requests for a U.S. policy on private operation of expendable launch vehicles by commissioning an interagency study.

Akaka's bill was reintroduced in January 1983, and hearings were held in May. Meanwhile, there reportedly had been debate within the administration between those who feared private sector competition with the Shuttle and those who ideologically favored commercialization. Space commerce activists including Charles Chafer, Courtney Stadd, and Klaus Heiss lobbied vigorously. The outcome was that in May 1983 the White House issued a new policy favorable to private launch vehicle operators, which said that the U.S. government fully endorses and will facilitate commercial operations of expendable launch vehicles by the U.S. private sector. This policy applied to those vehicles previously developed for U.S. government use, as well as new space launch systems developed specifically for commercial applications.[42]

Shortly thereafter, NASA announced a worldwide effort to market Shuttle launch services. Meanwhile, the Akaka bill was being marked up in the House Science and Technology Committee. Hearings were scheduled for November 1983. Representatives of private launch vehicle companies such as Chafer and Stadd lobbied for their preferences for a "lead agency," which tended to lean toward the Department of Commerce. However, the White House announced just before the hearings that the Department of Transportation had been chosen as the lead agency. In February of 1984, Transportation Secretary Elizabeth Dole announced the creation in her own office of an Office of Commercial Space Transportation, headed by Jennifer (Jenna) Dorn, which was to expedite applications for launch permits. A Commercial Space Launch Act (a revised version of the Space Commerce Act) was signed by President Reagan in October 1984.[43]

Privatizing Government Launch Vehicles

Once the Shuttle became operational, NASA's expendable launch vehicles were to be phased out and their production lines shut down. However, some companies saw a commercial opportunity in taking over these established systems, and the Reagan White House was sympathetic to the privatization of these vehicles. Aerospace engineer David Grimes founded a company called Transpace Carriers Inc. in September 1982. In May 1984, the company signed an agreement with NASA to transfer that agency's Delta launch vehicle program to the firm, which describes itself as "the first operational privately owned spacecraft launch services company in the U.S."[44]

Established corporations also showed interest in privatizing expendable launch vehicles. General Dynamics submitted a proposal to take over the Atlas Centaur launch vehicle, and it looked as if Martin Marietta Corporation might market the launches of its own Titan vehicle.

Buy Your Own Shuttle

The idea of commercializing the Space Shuttle occurred to several people in the 1970s. One was an ex-Braniff Airline pilot named William A. Good, who founded a small company called Earth Space Transport Systems. "Why," he reportedly asked, "should we continue to allow NASA to make the decisions on who sends what, or whom, into orbit?" In 1979, Good proposed a Space Transportation Act that would establish a commercial space transportation system in cooperation with other countries "to provide global access to outer space at the earliest practical date." In language reminiscent of OTRAG and Earthport, care and attention was to be given to providing such services to economically less developed countries.[45]

Another advocate was Klaus Heiss. In 1978, when the Carter administration cancelled funding for the fifth Shuttle orbiter, Heiss asked the Office of Management and Budget if they would agree to a private Shuttle purchase. According to Heiss, OMB said yes. Working closely with the Boeing Company, which had been studying the concept, Heiss, in 1979, started the Space Transportation Company (Spacetran) in a joint venture with the investment firm William Sword and Company, with the intention of buying the yet-unbuilt fifth Shuttle orbiter and making it a commercial venture. The company, which reportedly got a positive reaction from the Reagan administration, made proposals to NASA in 1982, but the government decided that no fifth orbiter was necessary. Spacetran decided in May 1982 that an expendable launch vehicle backup was needed and made a proposal to commercialize the Titan launch vehicle. In the view of Heiss, there could have been a commercial Titan in the spring of 1983 if NASA had not been opposed to competition for the Shuttle. In May 1983, Federal Express bought into Spacetran and created a new company called Fedex Spacetran.[46]

In 1983, aerospace executive Willard Rockwell stepped into the picture with a firm called Cyprus International, later Astrotech International, which approached NASA about purchasing a fifth orbiter (which Rockwell International manufactures). Astrotech has since established a subsidiary called Space Shuttle of America.[47]

In May 1984, a senior NASA official said chances are ten to one that the space agency will eventually turn over Shuttle operations to the private sector, beginning in two to three years.[48] Meanwhile, a firm called Third Milennium Inc. (formerly Transpace Inc.) proposed a mini-shuttle to be launched from the top of a Boeing 747 aircraft.[49]

Upper Stages

By design, the Space Shuttle carries payloads into a low Earth orbit; getting to higher orbits requires an upper stage. For its large satellites, the Air Force has developed the Inertial Upper Stage. NASA is adapting the Centaur upper stage used on expendable launch vehicles for use on the
Shuttle beginning in 1986. For small payloads, McDonnell Douglas Corporation provides the Payload Assist Module, developed and marketed under a 1976 agreement with NASA. Some satellite manufacturers are including propulsion units in their satellites.

A group of new space entrepreneurs believes that this array still leaves niches unfilled. During the 1980-81 academic year, Harvard Business School student David Thompson put together a team of students from the business and law schools to perform a six-month study for NASA on the prospects for space commercialization. Meanwhile, Thompson had learned that the Houston-based Space Foundation was offering fellowships for research on the same subject. After the NASA project was completed, Thompson and his colleagues applied for and won the Space Foundation award.

In early 1982, Thompson, Scott Webster, and Bruce Ferguson — none of whom were over 30 — saw a commercial opportunity in upper stages. They set up Orbital Sciences Corporation (originally Orbital Systems Corporation) to develop low-cost space transportation hardware. Texans Fred Alcorn and Sam Dunnam, both Space Foundation supporters, provided $300,000 in seed capital to finance the venture in its early phases.

Orbital Services signed a memorandum of understanding with NASA in December 1982, and in April 1983 the company signed an agreement with the space agency through which responsibility for the development of the Transfer Orbit Stage was transferred to OSC. NASA agreed not to develop a similar, competing vehicle of its own. Since then, OSC has outlined plans to develop an Apogee and Maneuvering Stage to serve a different class of payloads. In June 1984 the company announced the completion of a $63 million financial package, the largest private investment to that date in the space transportation industry.

OSC is aiming for an initial launch capability for its Transfer Orbit Stage in 1986.[50] In the best space enthusiast tradition, Thompson reportedly is seeking an assurance from NASA that he will be on that first flight.[51] His company is not just a source of income but a ticket into space.

SPACE MANUFACTURING

Space factories that would manufacture products for sale are central to the idea of space industrialization. The primary concept has been that of materials processing in space (MPS), taking advantage of the unique characteristics of the space environment, particularly microgravity. Although MPS experiments have been done since the Apollo days, many experts have remained skeptical about the commercial viability of space-based industry.[52]

The Space Shuttle helped bring the idea closer to reality. Tiny polystyrene spheres manufactured during the sixth Shuttle mission were sold by the National Bureau of Standards in 1985. Meeting two criteria for successful space manufacturing — they are expensive per unit and cannot be made as well on Earth — the spheres are the first commercial products made in space.[53]

More significant will be the first product made by a commercial firm. The Ortho division of Johnson and Johnson joined together with the McDonnell Douglas Corporation to build units that perform electrophoresis in the Shuttle orbiter, separating materials more efficiently than is possible on Earth. After successful experiments in 1983, which stirred widespread interest in space manufacturing, the companies hoped to begin production on the first flight of the Shuttle orbiter Discovery in the summer of 1984 (unfortunately, the electrophoresis products from that mission were contaminated).[54] The same mission also carried the first non-astronaut, McDonnell-Douglas employee Charles Walker (both the L-5 Society and the National Space Institute claimed him as their first member to go into space). NASA also has signed joint endeavor agreements with the small Florida-based firm Microgravity Associates to develop a process for the production in space of semiconductor materials. October 1984 saw the announcement of a ten-year agreement between NASA and the 3M Corporation for MPS work on the Shuttle orbiter and in the space station.[55]

If industries are to grow in space, they will need facilities more permanent than the Shuttle orbiter. Fairchild Space Company is developing an unmanned satellite called Leasecraft, which would provide an orbiting platform with control, power, and communications facilities to sustain various kinds of commercial operations in space.[56] Former NASA spacecraft designer Max Faget heads a company called Space Industries Inc., located near the Johnson Space Center outside Houston, which plans to build a pressurized orbiting module capable of providing a shirt-sleeved environment for technicians visiting automated manufacturing operations in space.[57] Like the Spacelab sometimes carried on the Shuttle, space factories will open up opportunities for more non-astronauts to go into space.

SPACE COMMERCIALIZATION GATHERS MOMENTUM

The space commercialization phenomenon visibly gathered momentum after the May 1983 White House announcement concerning expendable launch vehicles. That same month, the National Academy of Public Administration issued a report, done at the request of NASA,
entitled Encouraging Business Ventures in Space Technology.[58] The
report recommended that the administration declare and institutionalize a major commitment to the commercialization of space technology. Almost simultaneously, the National Chamber Foundation, which is affiliated with the U.S. Chamber of Commerce, initiated a study of how the environment for space commercialization can be improved. The principal researcher was Gregg Fawkes, himself a young entrepreneur. NASA established its own commercialization task force in June 1983.

In August, a group of aerospace executives met with President Reagan to discuss the commercialization of space, reportedly telling him that the White House must take a more aggressive and more publicly stated position that space commercialization would be good for the nation.[59] This was followed by the creation of a task force on the subject. In September, Cabinet Secretary Craig L. Fuller, who reportedly arranged the August meeting, was said to be writing a section on the commercialization of space for a "National Space Agenda."[60]

A symbolic culmination of this process came in the President's State of the Union address in January 1984 when he strongly endorsed space commercialization in connection with his space station initiative. In his radio address of January 28, 1984, the President said, "Obstacles to private sector space activities will be removed, and we'll take appropriate steps to spur private enterprise in space."[61] The White House issued a statement on July 20, 1984, concerning policy and legislative changes needed to achieve these goals and established a Cabinet Council on Commerce and Trade Working Group on Space Commercialization.[62] The Trade and Tariff Act of 1984 removed one impediment by permitting products manufactured in space by U.S. companies to enter the United States without duty.[63] In November, NASA announced the results of its own study of policy on space commercialization and outlined the functions of its Office of Commercial Programs.[64]

Meanwhile, the subject of space commercialization has become an industry itself. A Boston-based company called the Center for Space Policy Inc., staffed by young executives, provides consulting services for companies interested in the field. As of 1985, the newsletter Space Business News appeared to be flourishing under its omnipresent editor Linda Billings and had been joined by Space Commerce Bulletin, International Space Business Review, Commercial Space, and others.
Conferences on space commercialization are now a regular feature of the aerospace calendar.

THE FUTURE OF SPACE COMMERCIALIZATION

Space commercialization had become a legitimized field by the early 1980s and a growing one. Orbital Sciences Corporation President David Thompson has said that the number of companies in space enterprise went from 3 in 1980, when they invested about $10.5 million, to 25 in 1983, when their total investment was estimated at about $175 million.[65] Aviation Week and Space Technology and Space Calendar have
published lists of companies involved in space commercialization; as many as 350 had expressed interest as of 1984.[66] The Center for Space Policy has projected the potential annual revenues to be generated by the end of the century by major category of space business as follows:[67]

Satellite Communications

$ 15 billion

Remote Sensing

$ 2 billion

Materials Processing in Space

$40 billion

Launch Services

$1 billion

On-orbit Services

$2 billion

One new organization betting on the future of space industrialization is the American Interstellar Society, a nonprofit membership organization seeking to build a financial base to support entrepreneurial space ventures. Like the Committee for the Future's Project Harvest Moon, the society believes that people who own a share of stock will have more of a proprietary stake in the development of space commercialization than those who are just onlookers.

Some observers, notably George Washington University space policy expert John M. Logsdon, have warned that space commercialization is in danger of being oversold.[68] Like the space phenomenon in general, it may not develop as quickly as some of its advocates would wish, and many of the new companies will fail. Both Jerry Grey and Charles Sheffield believe that true commercial activity will not get under way until the 1990s.[69] On the other hand, there also have been predictions that space commerce then will grow with unexpected rapidity, partly because there are fewer vested interests or legal and regulatory restrictions in space. "The most profitable thing we will be doing in 2000," says Gregg Fawkes, "cannot be predicted."[70]

Philosophically and politically, many of the new space entrepreneurs are closely linked with hard-line private enterprise ideology. Two of the most vocal exponents in Congress for space industrialization led by the private sector have been Congressmen Newt Gingrich of Georgia and Robert Walker of Pennsylvania, who also are leading spokesmen for the Conservative Opportunity Society.

However, the motives are not just economic. One finds in many of the space entrepreneurs that same streak of independence or liber­tarianism that appeared in some of the pro-space citizens groups, notably the L-5 Society and the American Society of Aerospace Pilots. They see in space commercialization an opportunity not just for profit but also for liberty.

Entrepreneurship also provides an alternative, possibly shorter route to career advancement in the space field than the traditional choices open to pro-space people, such as working one's way up through the bureaucracy of NASA or a large aerospace corporation or being active in a pro-space group. Some of the pro-space groups have provided avenues for individuals to get involved in space commerce; some of the new space entrepreneurs, such as GCH, Arc Technologies/Starstruck, and Space Services Incorporated, hired space activists. In a sense, the new, young space entrepreneurs are a subculture of the pro-space movement.

It would seem that some space advocates have found a new way of turning space as an avocation into space as a vocation. Commercialization is a short cut to the space dream.

Space commercialization could create a new and potentially influential set of economic interests, distinctively oriented toward space rather than being submerged in aerospace. This could strengthen the pro-space constituency. Many of the entrepreneurial companies are not contractors to NASA but independent actors whose lobbying in Washington is more against restrictions on their activities than for federal funding. As of 1984, lobbyists for the new launch vehicle companies were exchanging information in an informal network. With the support of the administration, the National Chamber of Commerce, and others, a loose coalition supporting private sector space development is emerging, far better funded than the citizens activists who played a role in legitimizing these ideas and bringing them to the attention of the public.

Space commercialization, like space militarization, is a potentially divisive issue for the pro-space movement. In the eyes of some, space commercialization tarnishes the "purity" of space. But the criticisms have been much less severe than in the case of space weapons. Many recognize that space commercialization could help to reduce the dependence of civilian space activities on politics and the annual budget process; it is an alternative to politically or militarily driven space projects (although it has become possible only because NASA and the Department of Defense funded the development of many of the technologies). Although it may be a slower route to the planets and the stars than a politically motivated space program like Apollo, space commercialization may be more lasting. Observes Robert L. Staehle of the World Space Foundation: "No frontier has ever prospered on government money alone."[71]

For a brief overview, see the articles of Barbara Luxenberg, "Preliminary OK for Direct Broadcast Satellites," Astronautics and Aeronautics, September 1982, pp. 20-21, and "Hat in the Ring for Direct Broadcast Satellites," Astronautics and Aeronautics, September 1982, pp. 32, 86.

Much of this is based on an interview with Gary C. Hudson, April 19, 1984. William S. Bainbridge briefly treated Hudson's early years in The Spaceflight Revolution (New York: John Wiley & Sons, 1976), pp. 227-28. See also L-5 News, October 1976, p. 11.

Siegler was interviewed for Vernon Louviere, "Space: Industry's Newest Frontier," Nation's Business, February 1978, pp. 30-41. His article "Marketing Space" appeared in L-5 News, March 1980, pp. 14-17. The Earth/Space Newsletter was noted in the Futurist, February 1976, p. 33.

Interviews with Mark Frazier, October 20, 1983, and July 16, 1984, and interview with Gary C. Hudson. The Space Freeport Project put out a press release on February 10, 1977, and the Sabre Foundation put out an Earthport Bulletin during 1978. See also "International Launch Center Proposed," L-5 News, June 1977, pp. 1, 6, and Carolyn Henson, "Gateway to the Stars: Earthport," L-5 News, April 1979, p. 8.

Materials distributed by William A. Good at a Symposium on the Moon treaty, Center for Strategic and International Studies, Georgetown University, February 1980. See also Randall Clamons, "Why on Earth ... Why Not in Space," L-5 News, December 1980, p. 12.

This is based primarily on an interview with Klaus Heiss. See also "Space Transportation Firm Agrees to Marketing of Titan," Aviation Week and Space Technology, December 6, 1982, pp. 26-27, and "Federal Express to Acquire Launcher Rights," Aviation Week and Space Technology, May 23, 1983, p. 24.